i know i my nvp,irr,mirr are all wrong can someone please let me know how to get the right answer? thanks

Webmasters.com has developed a powerful new server that would be used for corporations Internet activities. It would cost $10 million to buy the equipment necessary to manufacture the server, and it would require net working capital equal to 10% of sales. The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After the first year, the sales price and variable costs would increase at the inflation rate of 3%. The company's fixed costs would be $1 million per year, and would increase with inflation. It would take one year to buy the required equipment and set up operations, and the server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The firm believes 3 it could sell 1,000 units per year. 4 5 16 The equipment would be depreciated over a 5-year period, using MACRS rates. The estimated market value of 17 the equipment at the end of the project's 4-year life is $500,000. Webmasters' federal plus-state tax rate is 40%. 18 Its cost of capital is 10% for average risk projects, defined as projects with a coefficient of variation for NPV 19 between 0.8 and 1.2. Low risk projects are evaluated with a WACC of 8%, and high risk projects at 13%. 21 a. Develop a spreadsheet model and use it to find the project's NPV, IRR, and payback. 22 20 Part 1. Input Data (in thousands of dollars) Market value of equipment in 2006 Tax rate WACC Inflation $500 40% 10% 3.0% Years 2 3 Equipment cost $10,000 3 Net Operating WC/sales 10% 9 First year sales (in units) 1,000 30 Sales price per unit $24.00 31 Variable cost per unit $17.50 32 Fixed costs $1,200 33 34 Part 2. Depreciation and Amortization Schedule 35 Year Initial Cost 36 37 Equipment Depr'n Rate 38 Equipment Depr'n, Dollars 10,000 39 Ending Bk Val: Cost - Accum Dep'rn 40 41 Part 3. Net Salvage Values, in Year 4 42 Estimated Market Value in Year 4 43 Book Value in Year 4 44 Expected Gain or Loss 45 Taxes paid or tax credit 46 Net cash flow from salvage 47 Accum'd Depr'n 4 20.0% $2,000 32.096 $3,200 19.096 $1,900 12.096 $1,200 $1,700 $8,300 Equipment $500 1,700 -1,200 480 -S720 Note: You will get capital loss, not gain! 0 1 2 3 Part 4. Projected Net Cash Flows (Time line of annual cash flows) Year's Investment Outlays at Time Zero: Equipment (10,000) 1,000 $24.00 $17.50 1,000 $31.20 $22.75 1,000 $40.56 $29.58 1,000 S52.73 $38.45 3 Operating Cash Flows over the Project's Life: 4 Units sold 5 Sales price 56 Variable costs 57 58 Sales revenue 59 Variable costs 60 Fixed operating costs 61 Depreciation (equipment) 62 Oper, income before taxes (EBIT) 63 Taxes on operating income (40%) 64 Net Operating Profit After Taxes (NOPAT) 65 Add back depreciation 66 Operating cash flow 67 68 Terminal Year Cash Flows: 69 Required level of net operating working capital 70 Required investment in NOWC 71 72 Terminal Year Cash Flows: 73 Net salvage value 74 75 Net Cash Flow (Time line of cash flows) 76 $24,000 17,500 1,200 2,000 3,300 1,320 1,980 2,000 $3,980 $31,200 22,750 1,236 3,200 4,014 1,606 2,408 3,200 $5,608 $40,560 29,575 1,273 1,900 7,812 3,125 4,687 1,900 $6,587 $52,728 38,448 1,311 1,200 11,769 4,708 7,062 1,200 $8,262 $2,400 ($2,400) $3,120 ($720) $4,056 (5936) $5,273 ($1,217) SO $5,273 Note: You do Note: You do (720) Note: You mus ($10,000) $3,980 $5,608 $6,587 58,262 You must includ Part 5. Key Output: Appraisal of the Proposed Project Net Present Value (at 10%) IRR 1 MIRR 2 33 $8,845 41.50% 25.03% R The first year fixed cost is $1,000 and will increase by 3% of inflation. Thus the second year fixed cost is $1,030. Net working capital is additional cost. The initial outlay is $10,000 plus 2,400 = $12,400 (thousands in dollars) Watch out that the NPV function in Excel does not take the cash flow in Year 0. Your formula should be something like; =NPV(WACC, CF1, CF2, CF3, CF4) - CFO And formula for MIRR is =MIRR(CFO, CF1, CF2, CF3, CF4, WACC, WACC) Do not type formula in sensitivity analysis to find new NPV for changes in input variables. Instead, you go up to INPUT section and change the value of variables to compute new NPV. For example, suppose you want to find new NPV for WACC=9%. Go up to cell 130 and change it to 9%. Excel should calculate a new NPV in cell 124. Copy that number into cell G103. Draw the graph right off from the table below the space assigned for the graph. Graph first three variables only